HAVE THE LOVE TIES BETWEEN ANGHEL AND SOBOLEWSKI BEEN BROKEN? BSE performance is dropping, three years into Sobolewski's term

The Bucharest Stock Exchange (BSE) has been going from bad to worse over the last three years, after the arrival of Ludwik Sobolewski as CEO, according to the performance ratios, which were set in his contract.

Liquidity, operating profit and the stock price of the BSE shares have fallen since 2015, after Sobolewski got lucky with the governmental listings of Romgaz and Electrica and with a few significant trades made by the Proprietatea Fund, in the beginning of his term.

In 2013, the CEO of the BSE, who had only been in office for just a few months managed to collect a performance bonus of approximately 150,000 Euros, for meeting the profit criteria (net annual profit was supposed to exceed 4.6 million lei, as, by mid-year, in other words before Sobolewski's arrival, in other words independently from his management, the profit had reached 4.2 million lei, and nine months into the year, it had reached 5.4 million lei) and for the restructuring he performed - namely the layoff of a few employees.

For 2014, Sobolewski would have been entitled to a bonus of over 300,000 Euros, according to the contract, as the evaluation criteria should have been compared to 2012.

The results of the BSE of 2014 were spurred by one-off events, the Electrica IPO, performed by the state and the buybacks and sales from its portfolio made by the Proprietatea Fund.

In 2014, the BSE had an operating profit of 11.13 million lei, up 172.7% over the one in 2012, (the contract stipulated a growth of more than 60%, as a performance benchmark), the average daily trading volume was 11.72 million Euros, 75% over 2012 (the contract stipulated an increase of over 50%, as a performance criterion), and the stock price on the BSE ended the year at 33.97 lei/share (the contract stipulated a price of 22 lei), while the criterion of a 50% increase in liquidity was not met.

In the absence of new state IPOs, Sobolewski failed to meet the performance criteria in his contract.

Last year, the operating profit was 3.25 million lei, down 70% over 2014, and the performance criterion was a 40% increase. Also, daily stock turnover decreased 33%, to 7.8 million Euros, as the criterion in the contract was a 35% increase, and the BSE stock was at 27 at the end of the year, while the requirement was 25 lei.

This year, the decline continued. The BSE stock even fell below the level since its acquisition by Sobolewski (24 lei), and it currently sit below 26 lei/share, while the performance criterion has been set at 28 lei.

Furthermore, the BSE has budgeted an operating profit of 3.46 million lei, this year, up only 7% compared to last year, even though, in order to get a bonus, the CEO was required to achieve a 30% profit increase. Performance indicators stipulate a 25% increase in liquidity, this year, and so far, the daily average turnover is 6.7 million Euros, down 14% over 2015.

In this context, Ludwik Sobolewski has repeatedly stated that the listing of Hidroelectrica this year, is the last chance for the BSE moving up to the emerging market status. Apparently the authorities want to postpone this listing until 2018.

In the beginning of the year, the CEO of the BSE told us that its objectives in its contract with the BSE have not been met, and he blamed external factors for that.

"It is very difficult to count on a higher volume of activity from domestic investors when prices have a downward trend, and global investors are searching for safe havens", Sobolewski was saying in January.

Sobolewski had a similar comment in the interview he granted us in July: "Liquidity is low due to external factors, which we all know about. I would like to make two remarks. If we look at volumes - the number of shares traded -, the decline isn't as great between 2013-2014, which were the better years, and 2015 until the present day. The stock market capitalization has decreased in that time frame. (...)The lack of privatizations has been very important. Right now it is crucial! I would say that the listing of Hidroelectrica is the last chance of being put on the monitoring list, in order to be promoted to the level of emerging market status and to change the perception on the Romanian capital market. It is the last chance in the medium term."

When asked whether he was considering a new term as CEO of the BSE, Ludwik Sobolewski told us: "My answer is that it is too early to think about it. There is more than a year until then. Time goes by fast.

If a number of conditions are met - if Hidroelectrica gets listed, if the Proprietatea Fund sells something, if we get RCS-RDS, this year can create a good change. Even now, it would all look better if there were more optimism in the market. But the evolution of the market isn't helping. I don't know what will happen to me personally, next year, but it is my goal to go ahead and to do more than I have done so far".

It seems that luck has decided to abandon Sobolewski, because, aside from the fact that there are talks about postponing the IPO of Hidroelectrica, RCS-RDS has decided to finance itself through bonds and not through an IPO.

Despite the weak performance, the BSE CEO has enjoyed a rather good image so far, with few critical voices. Lately, the naysayers claim that Sobolewski has lost one of his biggest fans - BSE president Lucian Anghel, as disagreements have appeared between the two lately.